Trade Shows and Delegations
Saudi Arabia hosts annual trade expositions in a broad range of industries. The U.S. Department of Commerce can sponsor you at most official trade shows, but strict Islamic rules make women's participation problematic. The religious police, the ubiquitous Muttawa, do frequent those shows to ensure that women don't attend. (See "Four Things You Should Know Before You Decide to Do Business in Saudi Arabia," next page) But foreign women accompanied by men have participated in "matchmaker" delegations organized by the Department of Commerce. Those groups of approximately 20 U.S. companies travel to Saudi Arabia to meet potential partners. The cost, $2,200 to $2,800 a person, does not include airfare or hotel. Moreover, like Larry Ethridge, you might meet your sponsor here in the States: Saudi businessmen seeking business partners often attend U.S. trade shows.
Resources: The National U.S.-Arab Chamber of Commerce (202-331-8010) schedules trade shows in the Middle East. Call the U.S. Department of Commerce's Trade Information Center (800-USA-TRADE) for its Export Promotion Calendar. Judy Riendeau (202-482-3119) can provide information on the Matchmaker Trade Delegations Program.
Joint Ventures
Saudi Arabia aims to lessen its dependence on oil revenues by diversifying through joint ventures with foreign companies willing to share technology.
Larry Ethridge, who is setting up a joint venture with a NESMA subsidiary, believes that the country's development plans and emphasis on cost cutting will benefit Topro, his industrial-control-systems business. "Part of the way you make things more efficient is by putting in better control systems," says Ethridge. "You don't really need a company like Bechtel to do that." Topro will own 49% of the new company, a stake Ethridge can live with, since, he says, he doesn't "feel comfortable having the controlling interest being so far away."
And because of the Saudi majority ownership, the venture benefits from Saudi incentives, such as preferential treatment in government procurement. Furthermore, agricultural and industrial businesses that are at least 25% Saudi-owned get a 10-year tax holiday; the respite for nonindustrial projects is 5 years. All joint ventures have access to cut-rate government financing; training subsidies; low-cost rent and utilities; and duty exemptions on imported machinery and equipment. Twelve commercial banks provide financing to joint ventures.
Resources: The National Technical Information Service (800-553-6847) sells the booklet A Guide to Establishing Joint Ventures in Saudi Arabia for $17.50.
Tapping Market Niches
Bill Aossey, president of Midamar Corp., based in Cedar Rapids, Iowa, has been exporting industrial and food-processing equipment and food products to Saudi Arabia for 20 years. Saudi sales represent 20% of revenues, which are less than $20 million. Aossey travels to Saudi Arabia three to four times a year to "get a pulse on changing market conditions," and reports that "consumer demand continues -- people still have money to spend." He has done business successfully with several Saudi companies, an achievement he attributes to his hard-earned status as a reputable business partner and his having chosen the right markets. Saudi Arabia's regulations require that food products list in Arabic all ingredients and dates of production and expiration. Midamar translates and prints labels for about 70 major American food exporters. "Once you find a niche for your product," Aossey says, "if you service your importer and your customers, you'll have a continuous market."
Donna Fenn, a writer based in Pelham, N.Y., worked in Saudi Arabia for four years.
Four Things You Should Know Before You Decide to Do Business in Saudi Arabia
1. Islam's predominance. Muslims pray five times a day; virtually close up shop during Hajj, the month of pilgrimage, and Ramadan, the month of fasting; and have strict regulations regarding alcohol and drugs, pornography, and separation of the sexes.
2. Potential for instability. Some Middle East analysts fear Saudi Arabia's budget crunch will force the government to cut its extensive social-welfare programs, which could lead to public unrest.
3. The Arab boycott. Saudi Arabia officially observes the Arab boycott and won't deal with companies that have ties to Israel. But experts predict relaxation as the peace process continues.
4. Restrictions for women. Social and religious customs make it difficult for women to do business, but don't let preconceived notions get in your way. Enlightened Saudi businessmen will accord a woman's idea or product the consideration it merits.
The Kingdom of Saudi Arabia
Population: 17 million, concentrated in Riyadh (the capital), Jidda, and Dhahran; approximately 4 million are guest workers. The indigenous population is growing by 3.4% annually
Official language: Arabic, although English is widely spoken
Political system: Monarchy headed by King Fahd bin Abdulaziz. The 21-member Council of Ministers is appointed by the king, and a "Consultative Council" is in the works
Religion: Islam. Fundamentalism is on the rise but is currently being kept in check by the government
Education: Not compulsory, but highly encouraged by the government, which pays for all education up to the Ph.D. level
Gross domestic product: $114.2 billion in l992; $108.7 billion in 1991; 3.5% average projected growth through 1994
Per capita income: $15,000
Inflation: 3% in 1991
Joint ventures with the United States: 187 projects, two-thirds of which are nonindustrial. Total U.S. capital invested is about $1.8 billion
Currency: The Saudi Riyal, roughly pegged to the dollar, has remained stable for more than seven years. SR 3.75 equals $1. There are no restrictions on repatriation of profits or capital. Regulations prohibit payments to or from Israel and South Africa
Hottest U.S. Exports
Last year U.S. businesses sold to Saudi Arabia $7.2 billion worth of goods and services, representing 20% of total Saudi imports. Total exports for 1991 and 1990 were $6.6 billion and $4 billion, respectively.
